Soton Equity and Trusts - alastairhudson.com

C. EQUITABLE TRACING
Reading: Hudson, sections 19.3 and 19.4
1. Need for prior equitable interest / proprietary base
Reading: Hudson, para 19.3.2
Re Diplock [1948] Ch 465 - fiduciary relationship required to base equitable proprietary claim.
Chase Manhattan Bank NA v. Israel-British Bank (London) Ltd [1981] Ch 105; [1980] 2
WLR 202; [1979] 3 All ER 1025 - mistake grounds a ‘proprietary tracing claim’.
Agip Africa v. Jackson [1991] Ch 547, [1991] 3 WLR 116; [1992] 4 All ER 451 - fiduciary
relationship / equitable interest a pre-requisite for equitable tracing.
**Boscawen v. Bajwa [1995] 4 All ER 769 - fiduciary relationship / equitable interest a pre-requisite for
equitable tracing.
*Westdeutsche Landesbank v. Islington LBC [1996] AC 669, [1996] 2 All ER 961 - semble,
‘conscience + knowledge’ is enough, no expressed need for prior interest.
Ibrahim v Barclays Bank [2011] EWHC 1897 (Ch)
Academic commentary:- Birks ‘Mixing and Tracing: Property and Restitution’ (1992) 45 CLP 69;
*Birks ‘Overview: Tracing, Claiming and Defences’ in Birks, Laundering and Tracing (1995) 289-
322; and Hayton, ‘Equity’s Identification Rules’ also in Birks, Laundering and Tracing (1995).
Criticisms of requirement for equitable interest before a tracing claim:- Birks, Introduction to the
Law of Restitution, 380-4; Goff & Jones, The Law of Restitution, 83-6; Oakley, ‘The Prerequisites of
an Equitable Tracing Claim’ (1975) 28 CLP 64; Pearce, ‘A Tracing Paper’ (1976) 40 Conv. 277.
2. Mixture of trust money with trustee’s own money
Reading: Hudson, para 19.4.1
a) Honest trustee approach
*Re Hallett’s Estate (1880) 13 ChD. 695 - presumption of trustee honesty.
b) Beneficiary election approach
*Re Oatway [1903] 2 Ch. 356 - beneficiary election.
c) Other approaches
Roscoe v. Winder [1915] 1 Ch 62
Re Tilley W.T. [1967] Ch. 1179
d) The modern approach – a question of property law, not justice nor unjust enrichment
**Foskett v. McKeown [2001] 1 AC 102, [2000] 3 All E.R. 97 – fraudster mixing innocent
volunteers’ money with own money; disapproving Hallett in part, now there is no restriction to a lien.
Clark v Cutland [2003] 4 All ER 733
3. Mixture of two trust funds or with innocent volunteer’s money
Reading: Hudson, paras 19.4.2 and 19.4.3
a) The general rule
Re Diplock [1948] Ch 465, 524:
‘Where an innocent volunteer (as distinct from a purchaser for value without notice)
mixes ‘money’ of his own with ‘money’ which in equity belongs to another person,
or is found in possession of such a mixture, although that other person cannot
claim a charge on the mass superior to the claim of the volunteer, he is entitled,
nevertheless, to a charge ranking pari passu with the claim of the volunteer …
Such a person is not in conscience bound to give precedence to the equitable
owner of the other of the two funds.’
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